The discussions come at a time when the group is considering a few options to monetise its stake in Tata Sons, including through a future listing of the Tata Group holding company, a defined roadmap to exit the ownership by bringing in external investors like a sovereign wealth fund, or a buyback or a share swap offered by Tata Sons, said people in the know. Any progress on monetising the group’s 18.37% stake in Tata Sons will likely reduce its future borrowing cost.
Deutsche Bank is reaching out to investors as the banker for the new issue.
Shapoorji Pallonji Group is in talks to raise ₹25,000 crore via unlisted debentures, targeting a 14-15% IRR. This comes as the group explores options to monetize its 18.37% stake in Tata Sons, including a potential listing or buyback, which could lower borrowing costs.
An SP Group spokesperson did not immediately respond to a request for comment, while Deutsche Bank could not be immediately reached for comment.
The group’s previous NCD, issued about five months ago and priced at 19.75%, is currently trading around 16.5-17.0% of IRR, which is leading to tighter pricing conditions, people in the know said.
AgenciesInterim Cushion Pricing talks for issue hover at 14–15%, lower than group’s last raise
“The earlier reference level of 19.0-19.5% IRR is no longer relevant, given positive developments around the Tata Sons stake. Recent trades have tightened, and investor demand has grown,” said a person close to the development. The transaction is expected to close by February, and if no announcement is made before closing, pricing could widen by about 200 basis points but not beyond 17% IRR. SP Group’s borrowing structure depends on the value of its 18.37% stake in Tata Sons, which is pledged with lenders. Any progress toward listing of Tata Sons or agreeing to an exit route supports debt pricing for the SP Group because it provides clarity on how it could eventually monetise the stake and repay debt. But the SP Group cannot independently monetise the stake. Tata Sons, being an unlisted and closely held company, must approve any sale, investor entry, buyback or restructuring. The SP Group is offering these scenarios to investors based on exploratory conversations. There are two possible scenarios for monetisation of Tata Sons stake by the SP Group. The first involves Tata Sons announcing a timeline for its long-awaited listing. Once such an announcement is made, the listing process itself may take 9-12 months. A listing would release the pledge on SP Group company Sterling Investment’s 9.1% stake in Tata Sons, turning the structure into a loan against listed shares and reducing borrowing costs to market levels. Cyrus Investments holds the remaining SP Group stake in Tata Sons.
An issuer call option after 12 months is being contemplated to allow refinancing at lower rates once the listing path is clear.
The second scenario revolves around a monetisation event jointly agreed between Tata Sons and the SP Group where Tata Sons will either buy back shares or do a share swap, or there could be the entry of a sovereign wealth fund alongside the SP Group. Such a monetisation event could take 6-12 months once agreed by both parties. Here too, the proceeds could be used to retire the NCDs early through the 12-month call option.
There is strong and growing interest from Japanese and Middle Eastern banks, financial institutions and bond investors in the NCDs, another source said.
Separately, SP Group company Goswami Infratech has initiated voluntary prepayment of part of its ₹14,300 crore NCDs raised in June 2023. It plans to redeem debentures with an outstanding nominal value of ₹562 crore, with total pay-outs including withholding tax estimated at around ₹900 crore, between December 18 and 26.
